Democrats all across America are calling for a raise in the minimum wage, from $7.25 to $10.10. The White House’s website has a page devoted to this, titled “Raise the Wage“. This webpage has the tag line that says, “It will lift wages for 28 million Americans. It will give businesses customers with more spending money. It will grow the economy for everyone — and we can do it right now.” With deeper investigation into these statements, it becomes apparent that they are not true at all.
It will lift wages for 28 million Americans.
Where does this number come from? Looking at the webpage, it becomes obvious where this number comes from. There are 28 million Americans working for minimum wage. If minimum wage increases, than all of their wages would increase as well. Right? Wrong. This statistic is assuming that everyone working for minimum wage would keep their job, when financially that is just not possible. Lets say my business can afford 10 workers working at $7 per hour (rounding for easier math). When that wage is then increased to $10 per hour, now suddenly I can only afford 7 workers. Because of this increase, I have lost 30% of my production. Like this example, all businesses have to do the same; layoff workers. In history, increases in minimum wage have always preceded a stall in the nation’s job growth.
It will give businesses customers with more spending money.
Lets go back to the earlier example. So my production is now down 30%. The demand for my product has not changed, but my supply has decreased. Basic finance and economics says that I need to increase the price at which I sell my product. So, does my business having “customers with more spending money ” help me? Not at all, because I needed to increase my prices.
Many companies do not lay off enough employees to make up for the increase in wages, however. So instead of paying the same for less production, they are paying more for the same production. These companies make up for this by also increasing their prices. Bloomberg released an article about larger chain restaurants planning to increase prices when minimum wage is increased. A minimum wage increase leads to an increased price for production, which then leads to an increase in costs.
Restaurants and Increases in Prices
It will grow the economy for everyone.
So, it is safe to say that the next time the minimum wage is increased, the number of jobs will decrease. It is also safe to say that prices everywhere will increase as well. Less jobs available, and more money needed to be spent does not sound like a growing economy. Neither does a 4.5% increase in the number of poor families (found by the 1997 National Bureau of Economic Research). Ironically, raising the minimum wage is intended to help the poor escape poverty. The “Raise the Wage” webpage is filled with statistics focused solely around the poor. The main argument for the page is those working minimum wage are in poverty, and raising their wages would help them escape it. Through further examination, we found that many would lose their jobs, and the overall economy will fall. Because of this, raising the minimum wage would not help our nation, but it especially won’t help those in poverty; the ones that raising the wage intend to help the most.